Grandes dames wielding lightsabers: AI and digital advances became luxury brands' latest wea

by Anh H. Nguyen


For an industry estimated to hold the stratospheric value of €260 billions (Bain & Company, 2018), the luxury goods sector was remarkably sluggish to embrace technology. It was not lack of coin that held them back: as of 2017, the top 100 luxury goods company had the minimum yearly sales of US$218 millions and an average size of US$2.47 billions. (Deloitte, Global Powers of Luxury Goods 2019) Moreover, this fancy industry tends to be dominated by a handful of big players: the ten largest luxury companies have an average size of US$7.59 billions and account for more than 30% of the total luxury goods sales. Those loaded establishments could easily afford all the cutting-edge developments the Digital Transformation had to offer, plus some more.


Yet as of 2016, 40 percent of all luxury fashion brands chose not to sell their wares online. Prior to 2010, even if a brand had an official website, it was nigh impossible to search for details on their offerings on the net. Pricing was an especially sticky topic, since due to various complex laws regarding import duties and taxes, the same item could be priced widely differently from one country to the next. So what did most brands do? They paid for luscious, glossy, elusive spreads in fashion magazines with nary a scrap of information except for their logos, held lavish fashion shows a few times annually, put their goods in their own boutiques and some premium department stores. And that was it. The old guards in particular, Chanel, Dior, Hermes, and Louis Vuitton, which coincidentally also made up the Big Four of luxury fashion, were notably steadfast in their shying away from the digital world.


That has all changed. To be clear, luxury fashion brands still did all of the above: the glamorous print ads, the exclusive shows, the limited number of venues where one can buy their merchandise. But the tides have turned. Now, not only anyone with an Internet connection could see the latest offerings with prices apropos to their locations, they could actually buy most of them. Chanel remains the most bullheaded in its refusal to sell online and has only relinquished its eyewear section, but it offers a wondrous feature to compensate: using one's own laptop webcam, one could "try on" all the sunnies and optical glasses with amazing fit and accuracy before buying. Despite not selling 99% of its products on the World Wide Web, Chanel was named the most influential luxury brand on social media in 2017. According to the Luxury Social Video Index (July 2017), Chanel videos of haute couture shows, behind-the-scenes, and stylish short films have generated an impressive 300 million views plus on both YouTube and Facebook, more than any other luxury brand.


Also a previously latecomer to technology, Louis Vuitton now engages young consumers by utilizing various social media platforms where it features Millennial and Gen Z influencers wearing the ubiquitous LV designs, posts the latest shows and campaigns, even hosts giveaway events. Its strategy to stimulate interest among the tech-savvy crowd has paid off: on average people spend 4.15 minute on the online Vuitton site, while similar websites only get 1.5 minute. 2017 also saw Louis Vuitton's first foray into data analytics when it launched a Digital Assistant chatbot powered by AI on Facebook, which allows users to share products with their Facebook friends and receive votes on what to buy. Kering, Louis Vuitton's competitor group which owns Gucci, Saint Laurent, and Bottega Veneta went one step further: it created the first in-house data science team of any luxury group. Its goal is to analyze customers' behaviours in real time with a 360-degree view in order to deliver truly world-class personalized service.


If all that sounds too futuristic, prepare for this: in 2018, Gucci launched the legendary “Gucci Hallucination” Spring Summer campaign which presented paintings featuring imagery from classic artworks with a twist: they all wore Gucci colorful maximalism designs. Augmented reality (AR) and virtual reality (VR) were a crucial part of the installation. Christian Dior also jumped on the VR bandwagon: its 3D-printed VR headset allowed visitors to travel through time and see backstage videos of Dior's biggest shows in the past. Balenciaga's Autumn/Winter 2018 collection also featured 3D-printed coats and jackets designed to be completely without seams, something a character out of 2001: A Space Odyssey would wear. When Alexander Wang hosted his Fall 2014 show in Brooklyn, he issued heat-sensitive invitations with step-by-step directions to the venue. The brand also teamed up with Uber to provide guests with 30% off Uber transportation. Omnichannel luxury, the immersive experience that merges multiple aspects of fashion, technology, and social interactions seems to be the direction that many luxury brands are taking. The future is already here.



Chanel Atelier Beauté in New York, a hyper-personalized space where customers use their phone to navigate the store (courtesy of Chanel Beauty).


Some may thumb their nose at all this digital disruption, deeming it gimmicky smoke-and-mirror. But the bottom line proved them wrong: online luxury had year after year of splendid, double-digit growth, reaching 10% of the total market. According to Jennifer Schmidt, "half of luxury goods buying decisions are already influenced by what consumers hear or see online." So two questions remain: If sales was invariably the ultimate goal, why didn't luxury brands race to adopt e-commerce and innovative technology before? And what made them change?


To answer both, it was imperative to take a glimpse at the history of luxury fashion. Most luxury brands with gleaming stores in Dubai, Hongkong, and New York today originated as one-man or one-woman shops catering to the elite, i.e. royalty, celebrities, and the super wealthy. Louis Vuitton started as a trunk maker; Coco Chanel, a milliner (hat maker). Hermès founded its empire on horseback, literally - Thierry Hermès created harnesses and bridles for European noblemen. The equestrian theme running through many of its products still serves as an indelible homage to its heritage. During those early days, exquisite quality and artistry were the focal point of the business. The idea of a brand was basically non-existent, since those illustrious creators were mainly concerned with satisfying their esteemed customers and making a small profit. Under strenuous circumstances, many like Christian Dior and Nina Ricci even resorted to collaborating with Nazis and serving their wives during WWII.


After WWII, resources became tight, but an aspiring middle class grew in full force and started to demand a piece of deluxe in their life. Many brands we know today discovered a method of making easy money: licensing. Dior, Yves Saint Laurent, and Pierre Cardin began handing out licenses like candy, stamping their coveted logos on everything from umbrellas to cigarettes. This strategy, while perfectly sensible in the short term, came back to bite them in the rear. Subpar quality and a sense of pervasive presence weakened the brands and soon they faced fiscal messes, barely getting by. Today Dior and Yves Saint Laurent still fortunately maintained their brands' integrity, but Pierre Cardin, for example, never recovered and was banished from the pantheon of high fashion forever.


What saved Dior and many other brands from a similar fate was what is known today as vertical integration. Henry Racamier, the great grandson-in-law of Monsieur Vuitton, discovered that franchisees were making a whole lot more money than the original brand, thanks to their understanding and know-how of the local market. Racamier decided to get rid of the middleman, bought back all the licenses floating about, and opened Louis Vuitton owned-and-operated stores, keeping a tight rein on production and merchandising. Other brands started to emulate Vuitton's success and the majority have become vertically integrated.


Nowadays most brands have gone corporate with two groups controlling most of the market, LVMH and Kering. Profitability has become the single-minded focus, but profitability, as brands have learned, is not so simple. If brands try to appeal to the mass, they may also appease shareholders but only temporarily. Exclusivity, or at least the veneer of it, is easy to lose but notoriously hard to gain back. In their fear of diluting the brands, business executives decided to be overzealous gatekeepers, not innovators. It was the case up to the late 2000s, but the growing global affluent millennial population has changed all that.


Luxury fashion brands, once the realm of wealthy women aged 30-50, discovered that their customer base has veered younger, starting at 20 in Asia. In support of that observation, "generations Y and Z represented 47% of global personal luxury goods consumers in 2018, accounting for one-third of sales." (Bain, 2018). And according to one Luxury Institute's report, Millennials, Gen X and even some Baby Boomers, regard brand history and heritage as much less significant attributes when making purchasing decisions, ranking them sixth after such metrics as quality, customer service, and design. Brands discovered that they could reach both goals of remaining relevant and keeping their prestige by utilizing technology.



Louis Vuitton launched its first personalization program in menswear “Now Yours" in 2018. (courtesy of www.louisvuitton.com)


It is a two-pronged approach. By flooding social media with their presence but keeping prices ranging from slightly expensive to exorbitant, brands remain aspirational. Most luxury brands today employ a pyramid model: haute couture at the top for the uber rich, ready-to-wear for the merely wealthy, accessories for the middle class, and a broad array of fragrances and cosmetics at the bottom for those who like some magic but could not afford $1000 pairs of shoes. As soon as people go online, they were surrounded by luxury: haute couture suits that cost as much as sport cars streaming on Youtube Live, colorful bags and shoes every season beckoning from Instagram, the latest makeup palette for sale on Facebook. At the same time, customers have become highly discerning and required more personalization to come with the price tag. When beautiful designs and impeccable services are no longer enough, personalization is the next logical step. In fact, it has become vital for brands to weave personalization into their long-term business strategy to ensure customer satisfaction and loyalty.


In this era of building relationships with customers based on data, Big Data has come into play. Through consumer segmentation, behavior and sentiment analysis, and predictive analytics, Big Data has aided luxury brands in providing personalized and superior customer service. Louis Vuitton, Burberry, Tommy Hilfiger, Dior and Estée Lauder have all taken advantage of machine learning and analytics to offer more personalized and timely customer services. New data-based digital strategies are developed everyday for luxury brands to derive customer insights and understand trends and developments. As it happens, business intelligence tools and software to capture data and generate insights have become the ultimate equipment in the arsenal of luxury brands.


So what does the future look like for the luxe industry? It seems digital is here to stay and permeate every aspect of the luxury consumption. By 2025, the online channel is estimated to represent 25% of the market’s value, up from 10% today. At the same time, the concept of luxury goods as a status symbol is quickly being replaced by that of a status experience. The new decade is slated to see more outrageous entwinement of fashion and technology, with hyper-servicing and omni-personal luxury being taken to astounding heights. Like it or not, luxury brands need to adapt or risk being left in the dust.

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